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Outdoor Slashing Rates as Demand Drops

Even Media Sectors Pegged to Grow Are Slowing Down

NEW YORK (AdAge.com) -- It's officially tough times when even media sectors that were expected to grow are making major cuts.

Witness outdoor advertising, pegged by PQ Media only as far back as October 2008 to increase 3% in 2009 to become an $8.5 billion industry. That projection also included digital out-of-home, expected to grow 9.1% in 2009, comprising nearly a third of outdoor's total $8.5 billion take. Yet fourth-quarter was unexpectedly rough for leading companies such as CBS Outdoor and Lamar, which saw declines of 14% and 9%, respectively, during the period. Publicly held Clear Channel Outdoor, the leading outdoor company, could not comment on market conditions prior to its fourth-quarter earnings report, but was also pegged by one analyst to be down by mid-to-high-single digit percentages in ad revenues.

Patrick Quinn, president of PQ Media, said despite an unexpectedly harsh two quarters, outdoor is still expected to finish 2009 with flat to slightly decreased revenue from 2008. But even with growth decelerating at faster rates, outdoor will still greatly outperform its traditional media counterparts such as radio, TV and print, all of which PQ Media predicts will be down in the high-single to low-double-digit range in 2009.

"Traditional media is the first to be impacted because they have a higher cost per thousand. Outdoor, however, is the last to feel it," Mr. Quinn said. "It may be a litlte bit slower to recover on the traditional side, but as digital is becoming a bigger part of the overall out-of-home pie, it's softening the blow, too."

Now no one is painting a bright portrait for the first quarter, which is seeing ad volume selling so slowly that several companies are slashing rates by as much as 25%, according to three executives familiar with negotiations.

Marci Ryvicker, an outdoor analyst for Wachovia, is already predicting first-quarter revenue at Lamar will be down by as much as 13%, with CBS Outdoor likely to outperform its other local media segments but show no signs of full recovery from its 9% loss in the fourth quarter.

Jack Sullivan, senior VP-outdoor buying at Publicis Group's Starcom USA, said few outdoor venues are being considered as must-buys for clients in a down economy, particularly with major cuts in the automotive, retail and financial sectors. "The good stuff you can't ever get discounted," he said, citing New York's Times Square, express-way billboards and other high-trafficked bulletins in major markets as examples. "In this day and age, for a lot of clients spending six figures on a sign is really minimal. I wouldn't be surprised if a lot of six-figure signs that went for $150,000 are going for maybe $110,000 now."

Telecom was the biggest spender in outdoor in 2007, the last year full year data is available. The top three companies -- AT&T, Verizon, and Sprint Nextel -- spent a combined $232.8 million. Media companies Time Warner and Walt Disney were the next biggest spenders, with $54.3 million and $48 million respectively. The rest of the top 10 was rounded out with McDonald's ($45.7 million), General Motors Corp.($45,2 million), Anheuser-Busch ($36.8 million), General Electric Co. ($28.5 million), and Coca-Cola Co. ($27.4 million), according to TNS Media Intelligence Data.

The sudden brakes put on spending prompted the Outdoor Association of Advertisers and Agencies to poll its members last month about plans to attend its annual OAAA Convention in Miami in May, where it was also due to announce the winners of the Obie awards, recognizing creative achievements in outdoor. OAAA President-CEO Nancy Fletcher issued the sobering verdict in a note to the trade group's members on Feb. 16 -- the convention was canceled.

"Many of you are struggling and making difficult decisions related to your businesses," she said. "A common theme we heard in our calls: Now is the time to stay home and take care of our customers and employees."

While saving OAAA members and agencies the travel expenses will cut down some costs, it won't do much to help communicate the measurement conversion the industry is about to undergo. The Traffic Audit Bureau, which measures traditional outdoor advertising like billboards and street furniture, is in the process of unveiling its new Eyes On metrics, which will convert outdoor audience measurement from a population-based metric to a more demographic-specific metric. As Rocky Sisson, global director for Clear Channel's sales and marketing, parsed it, "It's not just how many but who."

TAB president Joe Philport said the organization is currently planning on holding a series of webinars to members over the next few months to communicate the findings of the first Eyes On test in Chicago, which will identify demographic and behavioral trends in outdoor advertising for the first time. The TAB had planned on using the OAAA convention as a formal venue to discuss some of the key findings, but is now considering hosting regional events with member groups to fill the void. The first Eyes On webinar, held Feb. 12, was watched by 600 members, and is now available at EyesOnRatings.com.

TAB has encountered event-related setbacks of its own, having intended to unveil Eyes On a year ago at its own conference in Boca Raton, Fla., before scrapping plans at the last minute. A year later, Mr. Philport expects Eyes On to expand and evolve over the next three years.

One area not yet covered by the TAB is malls, a sector broadly defined by the OAAA as street furniture but not measured under the new Eyes On metrics. Seeing this, Michelle Schiano, VP-marketing for EYE, a mall-based out-of-home media company, tapped Arbitron for an extensive mall research study focusing on teens. The 14- to 17-year-old set are the only demo cut off from Scarborough Research's outdoor sample, used to broadly measure out-of-home audiences. EYE's mall study, conducted in five malls in November 2008, polled 320 teens who said they still spend money almost 80% of the time they're in a mall, with an average income of $77 a week.

"When we first heard the TAB was going to be coming up with a new method of measurement we were thrilled," Ms. Schiano said of Eyes On. "But that said, we've been talking with them throughout and fully supportive of their activities. In the future they absolutely do intend to do broader research that will encompass malls. We wanted to make sure there's hard data out there for media buyers and planners to look and understand the particular demographics and psychographics of the malls."